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Can Westinghouse Dodge A Nuclear Knockdown Punch?

October 02, 1994

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CAN WESTINGHOUSE DODGE A NUCLEAR KNOCKDOWN PUNCH?

From the sound of the testimony in Pittsburgh Federal Court, you would think Ralph Nader was raking the nuclear-power industry over the fuel rods. Witnesses charge a manufacturer with selling dozens of nuclear plants with leaky pipes and later conspiring to cover it up. Attorneys tell of utilities running shoddy operations, pouring caustic chemicals "like oven cleaner" into supposedly pristine water systems. Damaging charges for an industry in desperate need of good public relations--and they all come from two charter members of America's nuclear fraternity, Westinghouse Electric Corp. and Duquesne Light Co.

The two Pittsburgh companies, which teamed up to build and operate America's first commercial nuclear plant in 1957, are duking it out before a hometown jury. Duquesne, leading a partnership of five utilities, is seeking $350 million from Westinghouse for selling allegedly defective steam generators in the '60s, '70s, and '80s. Racketeering charges could triple the damages. Westinghouse, which faces four similar lawsuits across the country, is fighting back by charging that Duquesne botched the piping in the Beaver Valley Nuclear Power Plant outside Pittsburgh. "It's not good for either company," admits Thomas M. Anderson, Westinghouse's director of settlement management.

HOT WATER. Westinghouse, just recovering from the $5 billion meltdown of its financial subsidiary, has more to lose. Unlike General Electric Co., which has settled a host of similar suits over the past decade--including one last February with Duquesne and its partners--Westinghouse is fighting with a depleted war chest. A judgment of up to $1 billion and a series of me-too suits could plunge it back into deep trouble. Already, it is wrangling in court with 150 insurance companies over possible liability claims.

The source of the dispute: When Westinghouse built the first Beaver Valley plant in the late '60s, it used a new commercial technology called pressurized water. Radioactive water flowed past the fuel rods and, scalding hot, up through narrow tubes of the mammoth steam generators. This heated other water outside the tubes, creating steam to turn electric turbines. A small version of this system worked well on Navy ships. But by the early '70s, Westinghouse was seeing that the longer tubes in commercial plants were cracking and corroding. By the late '80s, many of its customers, including the owners of the two Beaver Valley units, faced overhauling or replacing the generators. Duquesne says it has had to order three new generators, worth $120 million, and that it may need three more.

Beaver Valley's warranty expired back in the '70s, but Duquesne and its partners charge that Westinghouse knew about the corroding tubing and hid it from its customers. "The key," says Duquesne CEO Wesley W. von Schack, "is what Westinghouse knew, when they knew it, and what they told the industry." The plaintiff's brief cites a 1968 memo from a senior Westinghouse engineer, stating: "What do we tell them at this stage? That the alloy is crumbling in front of our eyes or that service experience is good?"

Westinghouse's attorneys argue that such snippets from company memos are taken out of context. In the "crumbling" quote, for example, they say engineers were plotting ways to get more research funds from Westinghouse, not to fool customers. This defense worked before: Westinghouse won a 1991 suit brought by a Brazilian utility. But that case was decided by an International Chamber of Commerce panel in Switzerland.

BAD CHEMISTRY. Facing an American jury, Westinghouse's lawyers are racheting up their defense. First, they argue that Duquesne Light and its four partners--Ohio Edison, Cleveland Electric, Toledo Edison, and Pennsylvania Power--were sophisticated enough to understand the risks of metal corrosion. More explosively, they charge that Duquesne, the operator of the Beaver facility, failed to ensure proper water chemistry. The problems in the tubes were caused by tainted water, they say, the result of periodic miscues and haphazard plant chemistry control.

Westinghouse can only hope the jury agrees. With a new modular nuclear plant coming out in a few years, it is betting much of its future on the $1 billion nuclear division. But first, it must survive the suits. With five settled, five remain. And if it loses, more suits could come. Facing that scenario, the company has little choice but to disparage its customers in court. The question now: Will the utilities--and the public--forget all the ugliness when Westinghouse comes knocking with its new reactors?

MUDSLINGING IN

BEAVER VALLEY

DUQUESNE SAYS

Defects in Westinghouse's generators cause cracking and corroding, and the company has concealed the problems for 25 years.

WESTINGHOUSE SAYS

Duquesne's shoddy operations, including the pouring of caustic chemicals into the supposedly pristine water of its reactors, led to corrosion.